Tuesday evening, the Plaintiffs in the Illinois Class Action litigation filed motions with the U.S. Bankruptcy Court in Dallas asking that court to terminate the temporary stay it recently granted to Mt. Gox. They also asked that Robert Marie Mark Karpeles (the Foreign Representative for Mt. Gox) be ordered to provide testimony under oath in the United States regarding the Chapter 15 filing. The motion will present the first chance for the Bankruptcy Court to consider the balance between Chapter 15 relief and the ability of the Illinois Class Action Plaintiffs to use the fact of Chapter 15 relief to obtain testimony to buttress their pending action.
April 1 is the date on which the Bankruptcy Judge will conduct her first status conference regarding the Chapter 15 case. She has also set a hearing on the merits of the request for testimony that day. This will be Judge Jernigan’s first hearing in Mt. Gox’s case since the initial hearing was before another judge while she was unavailable.
That other judge granted Mt. Gox a temporary stay that protected its assets in the U.S. and froze all U.S. litigation against the company. The class action plaintiffs say that the injunction should be terminated and their litigation allowed to proceed because, among other reasons, Mt. Gox has not been transparent in its dealings with the U.S. Bankruptcy Court about its assets and operations. They note that Mt. Gox never disclosed to that court that Mt. Gox found 200,000 Bitcoins which raises the question of how it ever “misplaced” assets the plaintiffs describe as being worth $110 million. The plaintiffs also note the allegations that Mt. Gox and its principals (including Mr. Karpeles) have been accused of a massive and highly complex fraud.
The temporary stay is in place while the Bankruptcy Court ultimately determines whether Mt. Gox should be allowed to continue with its Chapter 15 case. That hearing is set for May 6. To prepare for that hearing, the plaintiffs want to require Mr. Karpeles to give sworn testimony about Mt. Gox, its assets and whether its Chapter 15 case should proceed.
The plaintiffs have sought to portray a soap opera of negotiations regarding possible testimony by Mr. Karpeles. Proposals included having the plaintiff’s attorneys travel to Asia to interrogate him or even taking his testimony via videoconference. The plaintiffs want in-person testimony in the U.S. because the judge would be available to decide in live time any disputes regarding questions or answers. Further, testimony with an interpreter could result in real time translation into English from French (Mr. Karpeles’s native language). Plaintiffs note that Mt. Gox chose to come to the U.S. for bankruptcy protection, a factor they cite in favor of obtaining Mr. Karpeles’s testimony in the U.S.
The allegations of fraud, that Mt. Gox’s actions appear “to be a highly complex financial crime” and that Mr. Karpeles has had prior legal scrapes should make for an interesting hearing. The motion notes, “Reports indicate that the Foreign Representative was found guilty of financial crimes involving a computer at some time when he was between 13 and 18 years old and received a three-month suspended sentence from a French Court.” Mr. Karpeles, it must be noted, is a few years removed from that phase of his life.
The Bankruptcy Court could require the testimony and consolidate the other issues to be heard on May 6 since whether the Chapter 15 should be allowed and whether the temporary relief should be terminated are essentially the opposing sides of the same coin. However, if that is the Bankruptcy Court’s decision, the temporary stay will likely continue through the May 6 hearing in any event.